El Salvador: Significant Progress on Fiscal Matters

The government and the opposition have finally reached an agreement and approved the Fiscal Responsibility Law along with the issuance of $550 million in debt securities.

Friday, November 11, 2016

The issuance authorized by the Assembly may be made on the international or local market, and funds will be used to pay principal and interest on short-term debt, budget support and strengthening of the Fiscal Fund at the General Treasury of the Republic.

Moreover, the approved fiscal responsibility law states that after the third year the tax burden should not be less than 17% of gross domestic product (GDP) and after the period of fiscal consolidation (3 years from the beginning of the Fiscal year 2017), current expenditure should not be greater than 18.5% of GDP. "

From a statement issued by the Legislature:

As a result of dialogue between parliamentary groups and the Government of El Salvador, a framework agreement was reached establishing the need to create a policy of fiscal sustainability, with the Legislature approving with 76 votes, the Fiscal Responsibility Law for sustainability of Public Finances and Social Development.

According to the decree, the legislation aims to issue rules to ensure medium and long term fiscal sustainability of public finances, which will contribute to the macroeconomic stability of the country.

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